Louisiana tax cut proposals stall in state Senate committee
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A Louisiana Senate committee shelved proposed tax cuts after an official estimate said they would cost the state $500 million per year.
The Louisiana House of Representatives voted in favor of the tax cuts in early May.
Senate Revenue and Fiscal Affairs Committee, led by Republican Senator Franklin Foil decided Sunday to not advance two tax cut bills and to amend a third bill to remove the sales tax cut.
“I’m very pleased that the Senate saw the fiscal reality and chose to do the right thing,” said Invest in Louisiana Executive Director Jan Moller. Invest in Louisiana is a liberal advocacy group focusing on aid to the poor.
Republicans hold a better than two-to-one advantage in both the state’s House and Senate.
Republican Rep. Julie Emerson had proposed the tax changes and argued a proposed constitutional change concerning the state’s second rainy day fund would make the changes revenue neutral.
The Louisiana Legislative Fiscal Office released its estimate of Emerson’s proposed changes this weekend and found they would lead to a net $500 million per fiscal year reduction in state revenues.
About 10 years ago the state created a second rainy day fund, the “Revenue Stabilization Fund,” for corporate income taxes. When corporate income taxes exceed $600 million a year, they go to this rainy-day fund rather than the state’s general fund. Money in this fund is used only for infrastructure spending and not the broad uses of the general fund.
Emerson’s proposals included bills to cut the state sales tax rate by 0.25 percentage points, the personal income tax rate by the same amount and a bill to double the standard tax deduction for people over 65 years of age. She also proposed changing the state constitution to eliminate the Revenue Stabilization Fund.
Moller said the state has about $3.5 billion in discretionary spending available each fiscal year and so a $500 million loss would have been a major hit. “We could have a really tough time balancing the budget and the Senate recognized this and put the brakes on it.”
Corporate tax revenues are highly variable depending on economic conditions. This is one reason the state created the Revenue Stabilization Fund, Moller said.
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Louisiana lawmakers are continuing to work on creating a fiscal 2025-2026 budget, which they are supposed to adopt by July 1.
Neither Foil nor Emerson responded to a request for a comment.
